Gold prices moved slightly higher on Monday after recording their steepest weekly decline since June.
The precious metal found support after weaker U.S. labor-market data reduced expectations for another near-term Federal Reserve interest rate increase. However, elevated Treasury yields and rising oil prices continued to limit gold’s upside.
At 02:12 ET, XAU/USD rose 0.21% to $4,149.19 an ounce, while gold futures gained around 0.4% to $4,176.97.
Silver also advanced, with XAG/USD climbing 1.6% to $61.36, while platinum rose 1.1% to $1,719.71.
Meanwhile, the U.S. Dollar Index increased around 0.4% to 102.31.
Weak U.S. Jobs Data Reduce Fed Hike Expectations
U.S. nonfarm payrolls increased by just 29,000 in September, falling short of market expectations.
The weaker employment report reduced pressure on the Federal Reserve to raise borrowing costs quickly in response to persistent inflation.
Markets are now pricing in roughly a 20% probability of an October rate hike, down sharply from about 70% one week earlier.
Lower expectations for higher interest rates are generally supportive for gold because the precious metal does not generate interest income.
Gold Posts Sharp Monthly Decline
Despite Monday’s modest recovery, gold remains under pressure following a difficult September.
Gold prices fell more than 6% during the month, marking their steepest monthly decline since June.
Investors had become increasingly concerned that higher energy prices could keep inflation elevated and force the Federal Reserve to maintain restrictive monetary policy for longer.
Those concerns pushed bond yields higher and reduced demand for non-yielding assets such as gold.
Fed Minutes Could Provide More Policy Clues
Federal Reserve officials have recently pushed back against expectations for another immediate interest rate increase.
Attention will now turn to the minutes from the Fed’s September policy meeting, which are due later this week.
At that meeting, policymakers raised interest rates for the first time in three years.
The minutes could provide investors with more information about how Fed officials view inflation, employment and the possibility of additional monetary tightening.
Higher Oil Prices Keep Inflation Risks Elevated
Although weaker employment data has reduced near-term Fed hike expectations, inflation pressures remain a concern.
Oil prices have risen as geopolitical tensions in the Middle East continue to increase.
In Yemen, Saudi-backed forces launched an operation aimed at retaking territory controlled by the Iran-backed Houthis.
A prolonged increase in energy prices could keep inflation elevated and complicate the Federal Reserve’s policy outlook.
That could ultimately limit the benefit gold receives from weaker labor-market data.
Treasury Yields Continue to Pressure Gold
Elevated U.S. Treasury yields are also weighing on gold prices.
Some bond yields have recently climbed to their highest levels in more than two decades.
Higher yields increase the opportunity cost of holding gold because investors can earn stronger returns from interest-bearing government debt.
U.S. Treasury Secretary Scott Bessent played down concerns surrounding higher borrowing costs, arguing that the increase in yields was broadly consistent with trends seen across global markets.
Gold Outlook Remains Mixed
For gold investors, the current environment presents conflicting signals.
Weaker U.S. employment growth and falling expectations for an October Fed rate hike provide support for bullion.
However, high Treasury yields, a stronger U.S. dollar and renewed concerns about energy-driven inflation continue to restrict gains.
ANZ said the reduced probability of an October rate increase is supportive for gold, but elevated bond yields and higher energy prices could continue to limit the precious metal’s upside in the near term.
